NICOSIA (AFP) - Russia on Friday, March 22, spurned investment proposals that would have helped rescue the Cyprus economy, piling pressure on Nicosia as it races to stave off financial meltdown and possible exit from the eurozone.

The European Union has given Nicosia until Monday to raise 5.8 billion euros (S$9.4 billion) to unlock loans worth 10 billion euros or face being choked from European Central Bank emergency funding in a move that would bankrupt the island.

EU sources have said that the bloc is ready to eject Cyprus from the eurozone to prevent contagion of other debt-hit members such as Greece, Spain and Italy.

MPs were to meet in emergency session on Friday to race through a raft of bills aimed at raising the funds and heading down a growing sense of anger and panic among Cypriots fearful that their life savings will disappear in the rubble of a banking collapse.

Local media said the start of the session, due at 0800 GMT, was delayed as the bills went back to parliament's finance committee for further examination.

One bill gives effect to a key plank of the rescue plan - the so-called Plan B - to set up an investment fund and nationalise pension funds, with bonds issued against future natural gas revenues.

A second bill imposes "temporary restrictive measures on the movement of capital".

Government hopes of an economic lifeline from Russia proved to be illusory and Cypriot Finance Minister Michalis Sarris left Moscow on Friday after two days of talks without reaching an agreement.

Russian officials said two major state-owned energy firms had turned down deals put forward by Mr Sarris and that Russia refused a loan request to fill a 5.8-billion-euro shortfall left by the EU-IMF bailout offer.

"Our investors examined this issue and showed no interest," Russian news agencies quoted the country's Finance Minister Anton Siluanov as saying.

He added that Moscow never reviewed the issue of providing a new loan, fearing that Cyprus, already on the brink of bankruptcy, could not withstand more debt.

Moscow has been angered by the original terms of a rescue plan for Cyprus proposed by the troika of international lenders that would have slapped a levy of up to 9.9 per cent on bank deposits.

That plan was overwhelmingly rejected by parliament, leaving the government scrambling to put together its current Plan B.

News of the Russian rejection did little to brighten the mood of bank customers standing in long queues at dispensing machines outside banks.

Banks have been in lockdown this entire week and are not due to reopen at least until Tuesday.

Around 200 protesters gathered outside the legislature on Friday and some sat down in the street, blocking access to the complex, after anger boiled over and scuffles with police broke out briefly late on Thursday.

Most of the crowd were employees of the Laiki or Cyprus Popular Bank, which is in the eye of the storm.

The bank's chief on Friday slammed the government's Plan B, saying the earlier proposal for a "haircut" on savings would have been preferable.

"Although we knew the gravity of the situation, and the initial proposal of the euro group was painful, it ensured the future of the banking sector," Mr Takis Phidias told state radio.

The chairman of the eurogroup of finance ministers, Mr Jeroen Dijsselbloem, said currency partners were willing to work with Nicosia on its new plans.

"The euro group stands ready to discuss with the Cypriot authorities a draft new proposal, which it expects the Cyprus authorities to present as rapidly as possible," Mr Dijsselbloem said after a two-hour conference call with fellow ministers.

But German Finance Minister Wolfgang Schaeuble was quoted by the mass-circulation Bild daily as saying he was sceptical about Plan B.

"Cosmetic changes alone are not enough," the newspaper quoted Dr Schaeuble as saying, citing government coalition members who met him late on Thursday.

Cyprus "must move and take serious measures" to consolidate its finances, he was quoted as saying.